BILL ANALYSIS                                                                                                                                                                                                    



                                                                            



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                                    THIRD READING


          Bill No:  SB 511
          Author:   Lieu (D)
          Amended:  1/22/14
          Vote:     21

           
          PRIOR VOTES NOT RELEVANT
           
          SENATE BUSINESS, PROF. & ECON. DEV. COMM. :  9-0, 1/13/14
          AYES:  Lieu, Block, Corbett, Galgiani, Hernandez, Hill, Padilla,  
            Wyland, Yee
          NO VOTE RECORDED:  Vacancy

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8


           SUBJECT :    Trade promotion:  California ports

           SOURCE  :     Author


           DIGEST  :    This bill requires the Director of the Governors  
          Office of Business and Economic-Development (GO-Biz) to convene,  
          no later than February 1, 2015, a statewide business partnership  
          for port trade promotion.

           ANALYSIS  :    

          Existing law:

           1. Establishes GO-Biz within the Governor's Office for the  
             purpose of serving as the lead state entity for economic  
             strategy and marketing of California on issues relating to  
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             business development, private sector investment and economic  
             growth.  GO-Biz also serves as the administrative oversight  
             for the California Business Investment Service and the Office  
             of the Small Business Advocate.  

           2. The California Tourism Marketing Act establishes the  
             California Travel and Tourism Commission (Commission) as a  
             separate, independent California nonprofit mutual benefit  
             corporation with the purpose of increasing the number of  
             persons traveling to and within California and requires the  
             Commission to prepare a written marketing plan.  

           3. Makes legislative findings and declarations regarding the  
             importance of strengthening collaborative linkages among  
             remaining California-based international trade and investment  
             (ITI) promotion programs operated at federal, state, regional  
             and local levels in light of the repeal of the statutory  
             authority for the Technology, Trade and Commerce Agency  
             (TTCA) in 2003.

           4. Specifies that GO-Biz is the primary state agency authorized  
             to attract foreign investments, cooperate in international  
             public infrastructure projects, and support California  
             businesses in accessing markets, and requires the Director of  
             GO-Biz to develop an ITI program attracting  
             employment-producing direct foreign investment to the state  
             and provides support for California businesses in accessing  
             international markets and increasing exports.  

           5. Authorizes GO-Biz to establish ITI offices outside of the  
             U.S. according to certain requirements.  

           6. Requires GO-Biz to prepare an ITI strategy and provide a  
             report to the Legislature on or before February 1, 2014,  
             updated once every five years that includes:

              A.    Policy goals, objectives and recommendations necessary  
                to implement a comprehensive ITI program.

              B.    Measurable outcomes and timelines for the goals,  
                objectives and actions for the program.

              C.    Impediments to achieving goals and objectives.


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              D.    Key stakeholder partnerships that will be used to  
                implement the strategy.

              E.    Options for funding.

              F.    An organizational structure for state administration  
                of ITI policies, programs and services.  

           7. Requires the Director of GO-Biz to prepare (a) a budget for  
             the ITI program and a separately stated budget for each ITI  
             office, with specified information; (b) a strategy and  
             business plan for the ITI program, with specified  
             information, that is developed with input from California  
             businesses that shall include, but not be limited to,  
             measurable goals, objectives, and outcomes and timelines  
             necessary to attract employment-producing direct foreign  
             investment to the state and increase California exports; and  
             (c) a written review of the implementation of the prior  
             year's strategy and business plan for the ITI program that  
             addresses the performance of the program and each ITI office.  
              

           8. Provides that the State Controller shall not allocate any  
             state funds to GO-Biz for ITI activities unless the strategy  
             for ITI has been submitted to the Legislature by May 1, 2014.  
              

           9. Establishes processes and accountability measures for GO-Biz  
             to accept private monies to fund, establish, and operate  
             international trade offices.  

          This bill requires GO-Biz to convene a statewide business  
          partnership that advises GO-Biz on port trade promotion, on or  
          before February 1, 2015; and requires the partnership to  
          include, but not be limited, to representatives from (1) ports  
          of entry; (2) ocean carriers; (3) marine terminal operators; (4)  
          warehouse operators; (5) railroads; (6) trucking companies; (7)  
          labor representatives; (8) foreign trade zones; (9)  
          environmental group representatives; and (10) shippers,  
          including agricultural exporters, manufacturers, postconsumer  
          secondary material handlers, and retailers.

           Background
           

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          Ports are local government agencies governed by port commissions  
          that are responsible for developing, maintaining, and overseeing  
          the operation of shoreside facilities for the intermodal  
          transfer of cargo between ships, trucks, and railroads.  In some  
          cases, certain ports have jurisdiction over affiliated airports,  
          build and maintain terminals for the passenger cruise ship  
          industry, or manage marinas and other public facilities.   
          Existing law establishes 11 ports in the state:  Hueneme,  
          Humboldt Bay, Long Beach, Los Angeles, Oakland, Redwood City,  
          Richmond, Sacramento, San Diego, San Francisco, and Stockton.   
          The law allows each port to establish a general plan and port  
          system improvements and prescribe the specifications for such  
          improvements.  

          According to the California Marine and Intermodal Transportation  
          System Advisory Council, more than 40% of the total  
          containerized cargo entering the United States arrived at  
          California ports, and almost 30% of the nation's exports flowed  
          through ports in the Golden State.  Port activities employ more  
          than 500,000 people in California and generate an estimated $7  
          billion in state and local taxes annually.  It is estimated that  
          nationwide, more than two million jobs are linked to  
          California's public ports.

          According to data from the Department of Commerce, California  
          exported $159 billion in products in 2011, up from $143.1  
          billion in 2010.  California's largest export market is Mexico,  
          where the value of exports totals close to $26 billion in 2011.   
          China is the largest source of imports into California; the 2011  
          value of Chinese imports was $120 billion.  

           The threat of expansion of the Panama Canal  .  Panama is  
          currently underway with an over $5 billion project to greatly  
          expand the Panama Canal making it deeper and wider, raising the  
          possibility of a significant impact on the flow of goods coming  
          into California's ports.  The project will double the capacity  
          of the existing canal by adding wider, deeper and longer locks  
          on both the Atlantic and Pacific sides.  The expanded Panama  
          Canal will be able to accommodate larger cargo ships, called  
          Post Panamax vessels, which could result in large freighters  
          loaded with goods from Asia destined for the Eastern United  
          States, thus bypassing California all-together and instead using  
          the canal to reach the other side of the country.  There is some  
          concern that California ports now have to compete against one  

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          another and expansion of the canal holds the potential for  
          California ports to lose as much as 25% of their cargo business,  
          by some estimates, which may in turn result in an impact of  
          millions of dollars to local economies and over 100,000 jobs. 

          The Panama Canal Authority, which runs the canal, has entered  
          into memorandums of understandings (MOUs) with 20 ports on the  
          Gulf and East coasts, including New Orleans, Miami and Baltimore  
          that are intended to promote freight passage through the canal  
          to those ports.  In the absence of a California effort to market  
          opportunities throughout the state, ports themselves, like the  
          Port of Long Beach, are approaching the Panama Canal Authority  
          individually to enter into their own MOU.  

          The Senate Business, Professions and Economic Development  
          Committee held a hearing on February 22, 2013 entitled "What  
          Does the Expansion of the Panama Canal Mean for Economic  
          Development and Jobs in California?"  Testimony focused on  
          efforts the state of California should take to remain  
          competitive with other states and other seaports, including  
          intermodal connection improvements, streamlined approval for  
          infrastructure and port improvement projects and promoting trade  
          at California ports through a comprehensive, collaborative trade  
          promotion strategy. 

           International trade efforts in California  .  Between 1986 and  
          2004, the TTCA was the responsible government entity for  
          promoting economic development, international trade, and foreign  
          investment in California.  When the agency was eliminated due to  
          its poor administrative performance, the authority for all state  
          trade activity was also eliminated and the few remaining  
          programs came under the umbrella of the Business, Transportation  
          and Housing Agency (BT&H).  The former International Investment  
          Division under TTCA had 91 employees and a budget of $43  
          million, allowing it to engage in activities like formal  
          marketing.  Beginning in the 2005-06 Session, several  
          legislative measures were introduced to reinstate the state's  
          trade authority.  SB 1513 (Romero, Chapter 663, Statutes of  
          2006) addressed these concerns by requiring BT&H to undertake a  
          trade study to determine what role the state should play in  
          international trade and foreign investment activities and  
          required them to establish a business advisory committee, and  
          development of a trade strategy consistent with the study and  
          acts as the vehicle for implementing the state's trade policy.   

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          The first strategy was published in February 2008 and the next  
          update is required in February 2014.  

          Until the creation of GO-Biz there were only a very small number  
          of former International Investment Division staff working on  
          trade related issues and activities for the state.  GO-Biz now  
          has authority for undertaking international trade and foreign  
          investment activities, including establishing any ITI office (AB  
          2012 (Perez), Chapter 294, Statutes of 2012).  GO-Biz has  
          partnered with the Bay Area Council to open a California-China  
          Trade and Investment office in Shanghai's downtown Yangpu  
          district.  In a March 2013 report to the Legislature on the  
          status of this effort, GO-Biz described the office's goals "to  
          drive increased employment, revenues at California enterprises,  
          tax revenues, and international competitiveness in California"  
          which will be accomplished through promoting investment in  
          California; facilitating two-way international business growth,  
          with an emphasis on expanding foreign sales by California  
          employers, including not only manufacturers, agricultural  
          enterprises, and commodity producers, but also service providers  
          such as universities, banks, consulting companies, and the like;  
          supporting continued growth of California's role as a gateway  
          state for goods movement and passenger travel, and; identifying  
          and addressing barriers to international expansion by California  
          employers.

           Comments
           
          According to the author's office, international trade accounts  
          for nearly 25% of the state's economy and relies on land ports  
          of entry and the largest seaport facilities in the U.S. to  
          maintain California's status as a major gateway for products  
          entering and leaving the U.S., including many goods moving  
          through California ports, such as industrial, technology and  
          postconsumer secondary materials originated in, or destined for  
          other states.  The state has a compelling interest in the  
          success of ports because of the significant economic benefit in  
          terms of jobs, personal income, business revenue, and taxes.   
          Ports are the vital interface between water and land  
          transportation for trade with the Pacific Rim countries and  
          other trade.

           Related legislation  .   SB 592 (Lieu, 2013) was identical to this  
          bill but also required GO-Biz to provide a port trade promotion  

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          strategy to the Legislature on or before April 1, 2014.  The  
          bill is being held in the Assembly Appropriations Committee.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          MW:k  1/22/14   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  NONE RECEIVED

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